nep-sea New Economics Papers
on South East Asia
Issue of 2009‒09‒05
ten papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges By Prema-chandra Athukorala; Archanun Kohpaiboon
  2. "An Econometric Analysis of SARS and Avian Flu on International Tourist Arrivals to Asia" By Michael McAleer; Bing-Wen Huang; Hsiao-I Kuo; Chi-Chung Chen; Chia-Lin Chang
  3. Pricing and Hedging of Asian Options: Quasi-Explicit Solutions via Malliavin Calculus By Zhaojun Yang; Christian-Oliver Ewald; Olaf Menkens
  4. The Margins of U.S. Trade (Long Version) By Andrew Bernard; J Bradford Jensen; Stephen Redding; Peter Schott
  5. International portfolio rebalancing and exchange rate fluctuations in Thailand By Jacob Gyntelberg; Mico Loretan; Tientip Subhanij; Eric Chan
  6. International financial transmission: emerging and mature markets By Felices, Guillermo; Grisse, Christian; Yang, Jing
  7. Agricultural Protection and Poverty in Indonesia:A General Equilibrium Analysis By Warr, Peter
  8. Long-term benefits from investing in international real estate By Schindler, Felix
  9. Pricing Asian Interest Rate Options with a Three-Factor HJM Model By Claudio Henrique da Silveira Barbedo; José Valentim Machado Vicente; Octávio Manuel Bessada Lion
  10. Agricultural Trade Reform and Poverty in Thailand: A General Equilibrium Analysis By Warr, Peter

  1. By: Prema-chandra Athukorala; Archanun Kohpaiboon
    Abstract: This paper examines the export experience of East Asian economies in the aftermaths of the global financial crisis against the backdrop of pre-crisis trade patterns. The analysis is motivated by the ‘decoupling’ thesis, which was a popular theme in the Asian policy circles in the lead-up to the onset of the recent financial crisis, and aims to probe three key issues: Was the East Asian trade integration story that underpinned the decoupling thesis simply a statistical artifact or the massive export contraction caused by an overreaction of traders to the global economic crisis and/or by the drying up of trade credit, which overpowered the cushion provided by intra-regional trade? What are the new policy challenges faced by the East Asian economies? Is there room for an integrated policy response that marks a clear departure from the pre-crisis policy stance favoring export-oriented growth? The findings caution against a possible policy backlash against openness to foreign trade arising from the new-found enthusiasm for rebalancing growth, and make a strong case for a long-term commitment to non-discriminatory multilateral and unilateral trade liberalization.
    Keywords: production networks, trade patterns, global financial crisis
    JEL: E32 F15 F40 O53
    Date: 2009
  2. By: Michael McAleer (Econometric Institute, Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute and Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics, University of Tokyo); Bing-Wen Huang (Department of Applied Economics, National Chung Hsing University); Hsiao-I Kuo (Department of Senior Citizen Service Management, Chaoyang University of Technology); Chi-Chung Chen (Department of Applied Economics, National Chung Hsing University); Chia-Lin Chang (Department of Applied Economics, National Chung Hsing University)
    Abstract: This paper compares the impacts of SARS and human deaths arising from Avian Flu on international tourist arrivals to Asia. The effects of SARS and human deaths from Avian Flu will be compared directly according to human deaths. The nature of the short run and long run relationship is examined empirically by estimating a static line fixed effect model and a difference transformation dynamic model, respectively. Empirical results from the static fixed effect and difference transformation dynamic models are consistent, and indicate that both the short run and long run SARS effect have a more significant impact on international tourist arrivals than does Avian Flu. In addition, the effects of deaths arising from both SARS and Avian Flu suggest that SARS is more important to international tourist arrivals than is Avian Flu. Thus, while Avian Flu is here to stay, its effect is currently not as significant as that of SARS.
    Date: 2009–08
  3. By: Zhaojun Yang; Christian-Oliver Ewald; Olaf Menkens
    Abstract: We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and price of the Asian option as an analytic, that is closed form, expression. Numerical computations which are based on this expression are provided.
    Keywords: Asian options, option pricing, hedging, Malliavin calculus.
    JEL: G12 G13
    Date: 2009–09
  4. By: Andrew Bernard; J Bradford Jensen; Stephen Redding; Peter Schott
    Abstract: Recent research in international trade emphasizes the importance of firms extensive margins for understanding overall patterns of trade as well as how firms respond to specific events such as trade liberalization. In this paper, we use detailed U.S. trade statistics to provide a broad overview of how the margins of trade contribute to variation in U.S. imports and exports across trading partners, types of trade (i.e., arm’s-length versus related-party) and both short and long time horizons. Among other results, we highlight the differential behavior of related-party and arm’s-length trade in response to the 1997 Asian financial crisis.
    Keywords: Heterogeneous firms, Product differentiation, Product market entry and exit
    JEL: F1
    Date: 2009–08
  5. By: Jacob Gyntelberg; Mico Loretan; Tientip Subhanij; Eric Chan
    Abstract: We present empirical evidence that the Thai exchange rate is driven in part by international investors' cross-border portfolio rebalancing decisions. Our results are based on two comprehensive, daily-frequency datasets of foreign exchange and equity market capital flows undertaken by nonresident investors in Thailand in 2005 and 2006. We find that net purchases of Thai equities by nonresident investors lead to an appreciation of the Thai baht. In addition, higher returns in the Thai equity market relative to a reference stock market are associated both with net sales of Thai equities by these investors and with a depreciation of the Thai baht. Foreign investors do not appear to hedge the foreign exchange risk related to their equity market positions. Despite this, we find that exchange rate movements were not key drivers of nonresident investors' equity market investment choices in our sample period.
    Keywords: foreign exchange market, capital flows, Thailand, equity market, nonresident investors, portfolio rebalancing
    Date: 2009–08
  6. By: Felices, Guillermo (Citigroup); Grisse, Christian (Federal Reserve Bank of New York); Yang, Jing (Bank of England)
    Abstract: With an increasingly integrated global financial system, we frequently observe that shocks to individual asset markets affect financial markets worldwide. The aim of this paper is to quantify the comovements between bond markets in the US and emerging market economies using daily data from prior to the East Asian crisis through to the early stages of the current global financial crisis. We exploit the changing volatility of the data to fully identify a structural VAR, without imposing ad hoc restrictions. We find that shocks that widen emerging market sovereign debt (EMBIG) spreads have a negative effect on US interest rates in the short run (consistent with 'flight to quality' effects), while shocks that increase US interest rates raise EMBIG spreads over longer horizons (consistent with 'financing cost' or 'search for yield' effects). We also find that shocks that increase EMBIG spreads tend to widen US high-yield spreads and vice versa, constituting an important contagion channel through which crises in emerging market economies can affect mature markets. Forecast error variance decompositions show that shocks to US long rates can explain around 60%-70% of the variation of EMBIG and US high-yield spreads.
    JEL: C32 F30 G15
    Date: 2009–08–24
  7. By: Warr, Peter
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,
    Date: 2009–06
  8. By: Schindler, Felix
    Abstract: This paper analyses long- and short-term co-movements between 14 international real estate stock markets based on bivariate testing for cointegration and correlation analysis. The results indicate that there exist strong long-term relationships within economic and geographical regions, but less long-run linkages between real estate markets in different continents. Thus, investors would benefit from broadening their investment horizon from their domestic continent to Australia, Europe, and Northern America. Furthermore, it is shown that within each region there are one or two key markets influencing neighbouring markets like Australia in the Asia-Pacific region, the U.S. in the Anglo-Saxon area, and France and the Netherlands in the EMU. Therefore it is implied, from an investor’s point of view, that it should be sufficient to focus only on these central markets. With respect to the efficient market hypothesis, the findings by cointegration analysis put some further doubt on its validity for securitized real estate markets.
    Keywords: Cointegration,Correlation Analysis,Diversification,Securitized Real Estate Markets
    JEL: C22 G11 G14
    Date: 2009
  9. By: Claudio Henrique da Silveira Barbedo; José Valentim Machado Vicente; Octávio Manuel Bessada Lion
    Abstract: Pricing interest rate derivatives is a challenging task that has attracted the attention of many researchers in recent decades. Portfolio and risk managers, policymakers, traders and more generally all market participants are looking for valuable information from derivative instruments. We use a standard procedure to implement the HJM model and to price IDI options. We intend to assess the importance of the principal components of pricing and interest rate hedging derivatives in Brazil, one of the major emerging markets. Our results indicate that the HJM model consistently underprices IDI options traded in the over-the-counter market while it overprices those traded in the exchange studied. We also find a direct relationship between time to maturity and pricing error and a negative relation with moneyness.
    Date: 2009–06
  10. By: Warr, Peter
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,
    Date: 2009–06

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